Planning now will help next spring
It’s tempting to put off thinking about taxes until next spring. However, as you presumably found while filing your tax return this year, a little additional preparation ahead of time will save you time when it’s time to do it all over again. Here are some of the simplest methods to start planning for next year’s taxes, as well as some year-round personal financial management advice.
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Configure Your System
Whether you prefer high-tech financial management tools like digital vaults, smartphone applications, and accounting software or more traditional methods like a box, an envelope, and a spreadsheet, the time to start sorting for 2022 is now. If you promised yourself while filing your most recent tax return that you would learn a new accounting system, starting now will allow you to learn the ins and outs with less stress. There is no right or incorrect answer; simply choose a system that works for you.
Look over your withholdings
If your employer withholds taxes from your paycheck automatically, now is a good opportunity to double-check that it’s the correct amount. If you only work part-time, the withholding may have been calculated based on a full-time salary expectation, and you’ve been overpaying. The same is true if you started a job in the middle of the year. Examine the outstanding sum for taxes payable this year.
Rethink your retirement strategy
Are you putting enough money down for retirement? Taking advantage of an employer match or maxing out a SEP plan? The IRS restrictions on tax-deductible IRA contributions, as well as the quantity of benefits provided by an employer, might alter. Check to see if you’re saving enough to cover your tax bill.
Make a financial forecast
To estimate their income and expenses, businesses create income projections. Individuals and families might benefit from it as well. It’s a forecast that considers cash flow, self-employment taxes, stock options, bonuses, and other factors that affect your earnings. If you’re likely to have a high sum due, your tax preparer will want to know about it as soon as possible.
Register for an account at IRS.gov
This is a wonderful moment to create an account on IRS.gov if you haven’t previously. You can obtain a transcript of your tax account transactions, line-by-line tax return information, or wage and income for a specific tax year as one of the perks. The IRS website should be simpler to access after mid-April, similar to the Where’s My Return? tool for tax returns, which crashes throughout tax season owing to high usage. And, once tax season is through, there is less of a chance of a long line to get technical support.
